Investing.com -- Jefferies has downgraded Crown Castle International Corp (NYSE:CCI) to a hold on limited upside from a potential sale of its Fiber business and headwinds from Sprint churn and slowing carrier capex.
The firm noted a potential dividend cut, estimating the Fiber business could fetch $8-10 billion, which implies a 6-8x EBITDA multiple, lower than expected.
Demand for data centers remains robust, driven by AI growth. Net absorption in top North American markets reached 5 GW in 2024, compared to just 360 MW in 2019. Jefferies highlighted supply constraints, including power availability and construction bottlenecks, as key challenges but also noted these conditions support higher rents and strong development yields.
Digital Realty (NYSE:DLR) remains Jefferies' top pick in the data center sector.
The outlook for tower operators is neutral, with domestic growth hindered by slowing 5G-related capex. However, Jefferies prefers American Tower (NYSE:AMT) due to its higher organic growth potential from international markets and benefits from its CoreSite data center business.
Jefferies maintains a Buy rating on AMT, while lowering its stance on CCI as the company grapples with operational and strategic uncertainties heading into 2025.